As Nigerian growth and consumer confidence slows evidenced by the continued slump in oil prices, falling naira, rising inflation and weak consumer spending, the banking sector seems the most hit.
Early earnings update of banks as of June 2015 showed deposits from customers stagnating.
The cumulative deposits from customers of 8 banks that have released results fell by 1 percent to N7.79 trillion, from N7.80 trillion as at December 2014.
A part from STANBIC IBTC HOLDING PLC with a deposit growth of 22 percent, the rest couldn’t grow their deposit above the 5 percent mark. See table.
The worst hit were Wema Bank, Diamond Bank and Skye Bank with -10 percent, -9 percent and -12 percent dip in deposits respectively.
Lenders were able to mobilize deposits in the last quarter of 2014 when they all grew deposits higher than the 5 percent mark except Unity Bank with a drop of 9 percent and Fidelity with a single digit growth of 2 percent.
Lenders in Africa largest economy are groaning under a rule forcing banks to place 31 percent of deposits with the Central Bank.
One major implication of the policy is that the cost of money is higher as naira liquidity dries up and banks are also less able to extend loans. This has weakened growth and lowered bank earnings.
It also means retail deposits, a significant portion of banks deposit base have become relatively expensive on rising competition amid reduced liquidity in the financial system.
While the CBN’s said the reason for hiking cash reserve requirements was to curb inflation and bolster the naira value which fell against the dollar in the past year, some analysts are however calling for a relax of the policy as liquidity squeeze is caging lenders growth prospect.
